LAW OF CONTRACT

Electronic Contracts & e-

Commerce
 Fundamental
Considerations
in Electronic
Commerce

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 E-commerce

1 2 3
Contracts made online: Note: emails: are excluded See Jill Poole Textbook on
acceptance will be when from Electronic Contract Law pp 71- 76 for
seller decides whether or not Commerce(EC Directive) interesting discussion of this
to accept your payment once Regulations 2002 and have to area.
it is validated. Seller will rely on the common law.
usually confirm acceptance
and send an email to buyer.
 Digital revolution

• The digital revolution has often been referred to as the third

industrial revolution and implies the change from analog
mechanical and electronic technology to digital technology,
occurring since the 1980s throughout the present day. The digital
revolution is both a manifestation and result of the emergence of
information communication technologies, and thus, inaugurates
the Information Age. This revolution entails mass production and
widespread use of digital logic circuits and its derived
technologies—that is, the computer, digital cellular phone, and fax
machines. The important technological, social, economic, and
political consequences brought about explain its revolution-like
nature. The information society represents the natural
environment of this phenomenon (Diaz Romero, 2014 AU77)
e-commerce

• e-commerce : ‘the use of global

internet for purchase and sale of
goods and service, including
service and support after the sale.
The internet may be an efficient
mechanism for advertising and
distributing product information …’

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A glimpse of E-Commerce

The term "Electronic Most of the time, it refers to

commerce" (or e-Commerce) the sale of products via
A client who purchases on
refers to the use of an Internet, but the term e-
the Internet. cyber-
electronic medium to carry Commerce also covers
consumer.
out commercial purchasing mechanisms via
transactions. Internet
What is it all about?
• e-commerce or eCommerce, refers to the
Internet based industry of buying and selling
products or services via electronic means. E-
Commerce uses a combination of Internet
technology, mobile commerce, electronic
funds transfers, escrowing services, electronic
data interchange, supply chain management,
inventory management systems, Internet
marketing, data collection systems, and many
other technologies and innovative business
systems. Most, if not all, e-commerce
transactions use the Internet for at least one
point of the transaction.
Benefits of E-commerce

• This rapid increase reflects the fact that electronic

commerce has a number of advantages over paper-based
commerce:
• In particular, speed and reducing the cost of doing business
(to access more market at low cost and with minimal
capital investment and few staff.
• E-commerce save time and money and the risk of lost or
damaged documents is reduced when documents are
transmitted electronically in a form of data message or
attachments.
• It offers great opportunities to both business and
consumers at a cheep rate.
Global trends in e-commerce
01
The changes in the ICT
landscape are creating greater
opportunities for businesses
to engage in various forms of
e-commerce.
02 03
B2B-(Business-to-business) B2C (business-to-consumer)
transactions involve transactions involve sales by e-
transactions between commerce enterprises to
manufacturers and consumers and by traditional
wholesalers, or between retail shops or manufacturing
wholesalers and retailers. firms that add an online sales
channel, appear to be growing
faster.
Everything online – Law goes
online?

• Online business
• Internet/computer crimes
• Computer evidence
Key legal issues in e-commerce

A recent study by UNCTAD

shows that the availability of
relevant laws in four legal
E-transaction laws Consumer protection
areas that are essential for
increasing users’ confidence
in e-commerce.

Privacy and data protection

Cybercrime
and,
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Electronic contracts (meeting minds online)

 Smart contracts and law
• The Internet is rapidly becoming the operational infrastructure of
the world and is facilitating communication between businesses all
over the planet.
• As a result, online contracting is frequently being conducted
between businesses, either in the same or in vastly different
jurisdictions.
• In most legal systems, traditional contract law contains a variety of
rules governing the process of contract formation. Generally, the
process comprises the exchange of an offer and a corresponding
acceptance.
• However, due to the characteristics of the Internet as a global web
of linked networks and computers, issues may arise in online
contracting that may not be sufficiently covered by traditional
contract law.
 Generally, the time of contract formation is when the
acceptance becomes binding and effective.

This point in time may vary widely under different

jurisdiction’s national laws. Further, the special
Online Contract

characteristics of the Internet may complicate the

issue of the time of online contract formation.

The common view is that the law that governs online

Formation

contracting should not differ too much from the law

that governs traditional contracting.

In many countries, strong reliance lies on traditional

contract law, rules and principles.
Electronic Contracts

• In the eyes of law, a contract is a

legally enforceable agreement
between two or more persons,
involving mutual promises to do
or not do something.
• The idea of ‘meeting of minds’ or
‘consensus ad idem’.
• Every Contract is based on an
agreement, but every agreement
does not result in a contract.
 Hi Alex, I’m
planning a picnic.
Sorry, it’s already
I’d like to rent your
rented to Eddie.
car for the next
You can have it
week.
Tuesday to
Thursday next week
though?

Deal!

‘consensus ad idem’ –meeting of the mind

 Emerging Arguments
• Argument: Acceptance by email would be complete if and
when the offeree sends the acceptance email, while being
online.
• Contract inter praestentes and inter absentes.
• The application of the postal acceptance rule to email
acceptances.
• The Rule established in 1818 as a legal norm in contract
formation to modern communications like the email.
• Arguments and rationale behind the application of this rule
and contends its applicability to the modern communication
via e-mail.
 Emerging Arguments
• Email is not an instantaneous method of
communication but can be viewed as a
digital version of the normal post and
thus the postal acceptance rule should
apply to this kind of contracting.
• There are therefore a
number of compelling
reasons why a review
of any legal obstacles to
electronic commerce is
necessary.

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 Paper-
based vs.
Paperless
 • Most of the principles under law of contract are
applied on e-Commerce, subject to modification
considering nature and behavior of electronic
records.
• Difference between traditional contracts and e-
contracts is the medium of transactions. In e-
Formation of Commerce, it is electronic medium.
• Principles relating to offer and acceptance under
E-contract law of contract are applicable for e-transactions
as well.
• Desplaying of goods and services on computer
moniter is considered an invitation to treat and
not an offer.
• Computer oprator has to offer and the same will
be accepted by the advertiser.
• Online contracts are
not different from
offline, and the
medium of transaction
are generally irrelevant
for law.
 Popular types of e-contracts
Business-to-business (B2B)
• Create transactions among and between businesses

Business-to-consumer (B2C)
• Businesses sell directly to the consumers/the virtual stores of business firms

Consumer-to-business (C2B)
• Sale of particular service or product that customer intends to sell

Consumer-to-consumer (C2C)
• Sale of products or processions of individuals to other individuals via net (Gumtree in Austrlia)
 Harmonisation of online-offline debate

1996 2001 2005

UNCITRAL Model Law on Electronic UNCITRAL Model Law on Electronic United Nation’s Convention on the
Commerce Signature Use of Electronic communications
in International Contracts (ECC)
UNCITRAL Model Law
• The Model Law is based on facilitating e-
Commerce, adapting existing legal
requirements and providing basic legal
validity and legal certainty to e-commerce
• UNCITRAL Model Law on Electronic
Signatures (2001)
• Objectives of the Model Law:
• To facilitate rather than regulate electronic
commerce
• To adapt existing legal requirements
• To provide basic legal validity and raise legal
certainty
 3 rules (rule 1)

Equal treatment of paper based and

Technology
electronic transactions and for different
neutrality
techniques of communication to enable
online contracts to be equal to offline
contracts.
 3 rules (rule 2)

Functional removing artificial barries to the recognition of e-

equivalence commerce by establishing the manner in which
electronic equivalent of paper based could be used
without impediments.
 Electronic
Transaction • The Act was prepared based on principles contained in the
Act, No. 19 of UNCITRAL Model Law in 1996 and UN Electronic Commerce
Convention of 2005.
2006 • Three fundamental policy principles form the basis of the
Sri Lankan Electronic transaction Act. They are:
• (a) technology neutrality;
• (b) functional equivalance; and
• (c) party autonomy
E-Contracts & • The Preamble: An Act to recognize and facilitate the
Electronic formation of contracts, the creation and exchange of data
messages, electronic documents, electronic records and
transactions other communications in electronic form in Sri Lanka; and
to provide for the appointment of a certification authority
Act and accreditation of certification service providers ; and to
provide for matters connected therewith or incidental
thereto.
 • Section 2(a) to facilitate domestic and international
electronic commerce by eliminating legal barriers and
establishing legal certainty;
• (b) to encourage the use of reliable forms of electronic
commerce;
Objectives of • (c) to facilitate electronic filling of documents with
Government and to promote efficient delivery of
the Act Government services by means of reliable forms of
electronic communications; and
• (d) to promote public confidence in the authenticity,
integrity and reliability of data messages, electronic
documents, electronic records or other communications.
Legal recognition of electronic records
Section 3 of the Act gives legal recognition to electronic documents in the form of data
message, electronic document, electronic record or other communication.

Section 4 provides for the legality of electronic equivalents to instruments which are
required to be in writing, provided that the information contained data message,
electronic document, electronic record is accessible for subsequent reference.

Section 7 provides for the Legal recognition of electronic signatures.

ELECTRONIC
CONTRACTS

• Section 11: In the context of contract

formation, unless otherwise agreed by
the parties, an offer and the acceptance
of an offer may be expressed in
electronic form. A contract shall not be
denied legal validity or enforceability on
the sole ground that it is in electronic
form.
Problems and solutions
(ETA Sri Lanka)
• Requirement of ‘writing’
• The requirement of ‘writing’ is considered as a main
obstacle relating to the formation of electronic transaction.
• Whether an electronic record can be accepted same as a
written record of commercial transaction?
• Benwell v Republic of Sri Lanka
“...the computer granted evidence is neither original
evidence nor derivative evidence [which can be accepted
under the Evidence Ordinance] can be admissible as
evidence and acted upon.
Cont…
• Section 3 of ETA
• ‘no data message, electronic documents,
electronic records or other communications
shall not be denied legal recognition, effect,
validity or enforceability on the ground that
it is in electronic form. With the effect of this
provision data messages and all other forms
of electronic communications have been
given legal recognition
• principle of technological neutrality
 Cont…
• Section 4
• Notwithstanding the fact that the provisions of written
laws for the time being in force in Sri Lanka attach legal
validity to certain instruments, only if such instruments
have been reduced to writing, such requirement shall be
deemed to be satisfied by a data message, electronic
document, electronic record or other communication in
electronic form if the information contained therein is
accessible so as to be usable for subsequent reference.
• legality of electronic equivalents to instruments which are
required to be in writing.
• Principle of functional equivalence
 People’s Leasing Company
Limited v. Muthuthantrige
Iran Fernando case
HC/Civil/201/2008/MR
• Ruwan Fernando J.
• I am of the view that ‘business Ledger’ is an ‘electronic
record’ within the meaning of the section 26 of the
ETA....Accordingly, computer printouts of Account
Ledger will be admissible as electronic records if they
are kept in the course of regularly conducted business
activities as a regular practice of the business activity
to make the record or data compilation by busyness
employees.
Cont…
• Requirement of signature
• signature in electronic documents is important to enforce
transactions.
• Where any Act or enactment provides that any information
or communication shall be authenticated by affixing the
signature, or that any document should be signed or bear the
signature of any person, then, notwithstanding anything
contained in such law, such requirement shall be deemed to
be satisfied, if such information or matter is authenticated by
means of an electronic signature.
Thank you!